The Iceman Cometh for Yahoo

/// The Iceman Cometh for Yahoo

January 30, 2014  |  Blog

If Marissa Mayer’s reality were in line with shareholder expectations, she would have been announcing job cuts on today’s earnings call. Instead, while announcing Yahoo’s terrible results, she focused on the uptick in traffic to Yahoo’s sites.

Anyone in the media biz will affirm that there’s a pretty direct correlation between content, traffic, and ads. You need a ton of the first two to get a lot of the last. And with display ad revenue down 6%, the company clearly needs a growing base of users. Someday, Mayer hopes, advertisers will clamor to get in front of Katie Couric’s many Yahoo News viewers.

So let’s try to imagine Mayer’s reality… A universe where the traffic thing nets Yahoo the sort of rich user data that Facebook and Google have long mined for better targeted ads… where the CEO can take years to build and tweak and make things generally more delightful, and then traffic flows like water and the higher-PPC ads flow like wine.

It’s a patient world, which is why it doesn’t exist and why Mayer’s plan, by extension, is a fantasy. She’s got time on her side until Alibaba goes public, and then, bammo. Investors will stop bidding up Yahoo stock in anticipation of the e-tailer’s huge IPO. Once the Chinese company’s valuations are grounded in the reality of its own quarterly earnings rhythms, Wall Street will remember Yahoo’s 2013. And then someone might not have a job. What Dan Loeb giveth, Dan Loeb can taketh away…

But when you’re the CEO of a struggling company, sometimes smarts and design savvy just aren’t enough to make things better. Unless you can charge a premium (which Yahoo can’t), you have to know how to run the business with relentless efficiency. Apple might make the best products, but as my ex-colleague Adam Lashinsky points out, it didn’t really soar until Tim Cook mastered the supply chain (by studying Dell’s), cut costs, and increased efficiency in the late 90s.

So Mayer is gonna have to cut costs in order to right the company. And that means massive layoffs. She reportedly agreed to axe a quarter of the 12,000-plus workforce when she auditioned for the CEO role. But with the exception of a few cuts at the end of last year, she hasn’t had the stomach to fire her people. Now might be a good time to read Bethany McLean’s Vanity Fair profile, or maybe just the final third of the story, as we all know the first 6,000 words about the geek goddess all too well. But just as your attention begins to wane, McLean nails the fair-haired CEO for being image obsessed and unwilling to heed the advice of others.

“Says one person, she was obsessed not with the reality of her pay but with making sure that what showed up in the filings would lead people to believe that she would earn more than she had at Google. “Some C.E.O.’s care about money, some care about metrics, some care about toys,” this person says. “She cares about public perception.”

“She is fearless in her decision-making not because she is fearless but because it doesn’t interest her mind that she could be wrong.”

Does this sound like a woman whose willing to make the sorts of unpopular, optics-unfriendly choices that it takes to right a business? Is she willing to be excoriated for short-term decisions that ultimately place her company on better footing. (Reed Hastings is the classic example of this. Wall Street and the business press barely remember how much they hated him for emphasizing streaming video…)

Yahoo’s CFO Ken Goldman said that over time the company will “become more efficient,” and when you’re not a manufacturing company that can press suppliers, that’s pretty much code for layoff. But he also told analysts that for now the company is focused on growing. Eric Jackson, a longtime Yahoo shareholder, says that Alibaba could meaningfully appreciate for 18 months after the IPO. If he’s right, that buys Mayer two years to figure it all out.

Unfortunately two years isn’t that much time. Mayer’s been in the top job a year and a half, six quarters of declining performance that whooshed by pretty fast. She may someday deliver the goods on traffic and content and premium ads, but very soon she won’t be able to take her time and the job cuts will have to come.

* Of course, this is just my opinion. For actual numbers and real reporting on Yahoo and everything else, subscribe to my new site

Link: The Iceman Cometh for Yahoo

Medium – Katie Benner

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